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Capitalist Crises and the Crisis This Time

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Capitalist Crises and the Crisis This Time CAPITALIST CRISES AND THE CRISIS THIS TIME LEO PANITCH AND SAM GINDIN I xactly a hundred and fifty years before the current crisis began in August E2007, the collapse of the Ohio Life Insurance Company in New York triggered what became known as ‘the great crisis of 1857-8’. As it quickly spread to Europe’s main financial centres, Karl Marx ‘was delighted and thrilled by the prospects for another revolutionary upsurge on the continent’. As Michael Kratke notes, ‘the crisis started exactly as Marx had predicted already in 1850 – with a financial crisis in New York’ and the crisis itself led Marx to extend ‘the scope and scale of his study’ for the Grundrisse notebooks he was working on, so as to take account of ‘the first world economic crisis, affecting all regions of the world’. In their correspondence, Marx and Engels agreed that ‘the crisis was larger and much more severe than any crisis before’, viewing the financial crisis as ‘only the foreplay to the real crisis, the industrial crisis that would affect the very basis of British prosperity and supremacy’.1 In October 1857, Engels wrote to Marx: ‘The American crash is superb and will last for a long time... Now we have a chance’. And two weeks later: ‘…in 1848 we were saying: now our moment is coming, and in a certain sense it was, but this time it is coming completely and it is a case of life or death’.2 As the crisis abated and began to fade away in mid-1858, Marx tried to understand why it had not turned out as expected. He came to the conclusion that the relatively rapid recovery could be largely explained by the sharp depreciation of capital on a large scale and an equally sharp and major shift in the structure of exports from Europe towards the colonies, with this especially applying to British industry which was then so central to global capital accumulation. This allowed for a return to dynamic capitalist growth, while at the same time reproducing the contradictions which, as Marx wrote in the Grundrisse, would lead again to ‘crises in which momentary suspension of all labour and annihilation of a great part of the 2 SOCIALIST REGISTER 2011 capital violently lead it back to the point where it is enabled [to go on] fully employing its productive powers without committing suicide. Yet, these regularly recurring catastrophes lead to their repetition on a higher scale, and finally to its violent overthrow’. Capitalist production, Marx noted, ‘moves in contradictions which are constantly overcome but just as constantly posited’.3 Fifty years later – a full century before the onset of today’s crisis – the great financial crisis of 1907 that also started on Wall Street and included a stock market crash, accelerating runs on the banks and an 11 per cent decline in US GDP, once again quickly spread to ‘an extremely severe monetary and banking crisis such as Europe had not experienced for a long time’.4 But since this crisis was even more short-lived than 1857-8, it provided little fodder for the theories of crises that had become so prevalent in Marxism in the wake of capitalism’s ‘first great depression’ that began in the mid-1870s, and which led Engels in 1884 to speak in terms of the ‘inevitable collapse of the capitalist mode of production which is daily taking place before our eyes’.5 II The Marxist search for a general theory of capitalist crises was intensified in the late 19th century in a context that confirmed deep crisis tendencies in the sphere of production, centred on the contradictions associated with capitalism’s constant drive to accumulation. But this begged the question of why the resultant overaccumulation was sometimes readily corrected and other times not. The appeal of Marx’s identification of a tendency towards a falling rate of profit (FROP), based on the rising organic composition of capital, was partly that it seemed to offer an answer to this, but aside from empirical controversies there was a basic conceptual problem that revolved around the many ‘counter-tendencies’ that were adduced, starting with Marx, to explain why the FROP does not always manifest itself. The problem lay in these counter-tendencies being, as often as not, the very substance of capitalism’s dynamics: i.e., higher rates of class exploitation, the development of new technologies and commodities, the emergence of new markets, international expansion, and innovations in credit provision, not to mention state interventions of various kinds. What the FROP offered in terms of theoretical certainty it lost as an expression of historical materialism. Too often its presentation as an economic law tended to be ahistorical and its materialism tended to be mechanical. The recognition of this was why, at least between the first great depression that ended in the mid-1890s and the even greater one that was triggered at CAPITALIST CRISES AND THE CRISIS THIS TIME 3 the end of the 1920s, the FROP was ‘long neglected or rejected by Marxist theorists’.6 The sense that capitalism had survived the first depression and entered a new stage was ‘a decisive factor in the “crisis of Marxism” which erupted at the end of the century’.7 Labriola’s assessment at the time captured the weakness of mechanical theories of economic breakdown: ‘The ardent, energetic, and precocious hopes of several years ago – have now come up against the more complex resistance of economic relations and the ingenuity of political contrivances’.8 Nevertheless, even though the mid-1890s economic recovery helped foster social democratic evolutionary revisionism, the language of crisis and collapse was never far from earshot in Marxist debates before the First World War. The very prescience with which Marxism in this period theorized inter-imperial rivalry leading to destructive war was now rooted in an expectation that continuing limits to domestic accumulation would drive further the export of capital and the colonization that had come to define the fragmented process of capitalist globalization in the last decades of the 19th century. It is well known that Marxists theorists were influenced in this respect by Hobson’s 1902 classic, Imperialism: A Study, while rejecting his notions, anticipating Keynes, that reformist redistributive measures would solve the domestic underconsumption that spawned external expansion. What is less well known is that Hobson himself was influenced by the writings of US business economists who, in the wake of the deep recession of the early 1890s, drew on Frederick Jackson Turner’s ‘closing of the American frontier’ thesis to argue that the domestic market was no longer able to sustain the enormous productive capacity of the newly-emerged corporate form.9 Their claims were soon to prove wildly wrong. By 1898 the US recession had ended, and home markets continued to dwarf exports. The frontier may have been filled territorially but accumulation within it was only in its very early stages when Turner identified its ‘closing’.10 Marxist crisis theorists at the time not only seriously misinterpreted the kind of capitalism developing in the United States, they more generally underestimated the long-term potential for domestic consumption and accumulation within the leading capitalist states. This was partly due to their failure to appreciate the extent to which working-class industrial and political organizations then emerging would undermine the thesis of the ‘immiseration of the proletariat’. But it was also due to their undeveloped theory of the state, which reduced it to an instrument of capital and underestimated its relative autonomy in relation to both imperial and domestic interventions. This shortcoming was also much in evidence among those Marxist theorists who, 4 SOCIALIST REGISTER 2011 unlike Luxemburg, began not with underconsumptionist tendencies but, like Hilferding, with the implications of the concentration and centralization of capital and the consequent fusion of industry and finance. This, they argued, led to limited competition at home alongside the recruitment of the state to aggressively support expansion abroad, and gave rise not only to the export of capital but also to the politicization of competition among the leading capitalist states – the ultimate outcome being cataclysmic inter- imperial rivalry. As we have argued in these pages before, the penetration and incorporation of the other developed capitalist states by the US imperial state in the second half of the 20th century rendered this old theory of inter-imperial rivalry increasingly anachronistic.11 And even as applied to pre-First World War capitalism, the political economy of underconsumption on the one hand and finance capital on the other was problematic; the understanding of the capitalist state was reductionist; and the explanation of imperial expansion was at best partial. It was ironic that Hilferding’s Finance Capital (1910), so highly influential despite mistakenly generalizing from German developments at the time, actually recognized that it was ‘impossible to derive general laws about the changing character of crises from the history of crises in a single country… [or from] specific phenomena peculiar to a particular phase of capitalism which may perhaps be purely accidental’.12 Many of these limitations in classical Marxist crisis theories have lingered to this day, and helped keep alive the notion that capitalism is in a late, if not quite final, stage. Since the Great Depression of the 1930s, there has especially been a propensity to see a permanent overaccumulation crisis whose consequences have been consistently delayed by special circumstances like war, waste or bubbles. This runs counter to the insight Marx arrived at shortly after the 1857-8 crisis that ‘permanent crises do not exist’, even while insisting that capitalism would repeatedly throw up new crises.13 Indeed, insofar as crises are ‘turning-points’, a very important question for Marxists today, especially given the impasse of the Left in face of the first capitalist crisis of the 21st century, is whether this crisis will also be a turning-point in the way the Left thinks about crises.
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